Navigating Meetings for Your Audit During COVID-19
Remote audit procedures can help protect the parties from health risks during the COVID-19 pandemic as well as streamline the audit process. Though, seeing people can be essential when it comes to identifying and assessing fraud risks during a financial statement audit. Virtual face-to-face meetings can be the solution to this issue.
What does an auditor review?
Auditing standards require auditors to identify and assess the risks of material misstatement due to fraud and to determine overall and specific responses to those risks. Specific areas of review under Clarified Statement on Auditing Standards (AU-C) Section 240, Consideration of Fraud in a Financial Statement Audit include:
- Whether management has knowledge of any actual, suspected or alleged fraud
- Management’s process for identifying, responding to and monitoring the fraud risks in the entity
- The nature, extent and frequency of management’s assessment of fraud risks and the results of those assessments
- Any specific fraud risks that management has identified or that have been brought to its attention
- The classes of transactions, account balances or disclosures for which a fraud risk is likely to exist
Auditors will also inquire about management’s communications to those charged with governance about the management team’s process for identifying and responding to fraud risks, and to employees on its views on appropriate business practices and ethical behavior.
Why does the auditor want to meet?
Normally, auditors require in-person meetings with managers and others to discuss fraud risks because a large part of uncovering fraud involves picking up on nonverbal cues of dishonesty. For instance, during a face-to-face interview, the auditor can observe signs of stress from the interviewee when responding to questions.
In-person meetings may cause safety concerns during the COVID-19 pandemic, particularly if either party is an older adult or has underlying medical conditions that increase the risk for severe illness from COVID-19 (or lives with a person who’s at high risk). In-person meetings with face masks aren’t ideal from an audit perspective, since they can muffle speech and limit the interviewer’s ability to see facial expressions.
A videoconference can help address these issues. Some people may favor the simplicity of telephone or audioconferences, but the use of the latest videoconferencing technology can help retain the visual benefits of in-person interviews. High-definition videoconferencing equipment allows auditors to detect slight nonverbal cues that may be critical to assessing an interviewee’s honesty and reliability.
Plan ahead for your audit
Evaluating fraud risks is a critical part of your auditor’s responsibilities. Anticipating the types of questions your auditor will ask and ensuring your managers and accounting personnel are all familiar with how videoconferencing technology works can help facilitate the audit process.
If you have questions about audits for your organization, contact us today.
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